Double-Digit Premium Hike Debunks California’s “Active Purchaser” Claim
(A version of this Health Alert was published by Orange County Register.)
With some embarrassment, Covered California (the state’s Obamacare exchange where people can purchase health coverage) has announced the average premium hike next year will be 13.2 percent. For many subscribers, the hike will be much greater because of the way federal tax credits discount premiums.
This year, a 40-year-old single person making between $17,820 and $23,760, can buy a Blue Shield Silver level plan with a monthly premium of $318. However, the subscriber only pays $122 while the federal government chips in $196. Next year, the premium will go up 20 percent to $381, of which the subscriber will pay $170, while the government will chip in $211. The total premium will increase by 20 percent ($63), while the subscriber’s net premium will increase 39 percent ($48).
Next year’s premium hikes debunk Covered California’s claim that its power to act as an “active purchaser” gives it an advantage in holding down rate increases. California is one of only four states in which the Obamacare exchange has the statutory authority to act as an “active purchaser,” substituting its own judgement about benefits consumers value for their own. Covered California dictates, for example, a primary-care visit has a $45 co-pay for those with Silver plans; or that a family deductible is $4,500.
According to Peter Lee, Executive Director of Covered California, consumers do not really care about the ability to choose plans with different features. “What’s the difference between them?” In order prevent consumers making choices of plans with different co-pays and deductibles, Covered California only accepted 12 of 32 insurers which initially showed interest in participating in 2014. UnitedHealthcare, the country’s largest insurer, entered Covered California in 2015 but will not participate in 2017.
Commenting on next year’s double-digit rate hikes, Covered California Executive Director Peter Lee blamed the cost of prescription drugs and the end of some federal subsidies for the problem. Neither claim stands up to scrutiny.
Although drug costs have been increasing faster than other health costs, that trend is breaking down. The Milliman Medical Index, prepared by a leading firm of consulting actuaries, reported health costs for employer-based plans experienced the “lowest annual increase in 15 years” this year, at 4.7 percent. Prescription drug spending grew 9.1 percent, down from 13.6 percent in 2015. IMS Health, a leading provider of health market intelligence, forecasts U.S. prescription spending will increase between just 4 percent and 7 percent annually through 2020.
The special subsidies to which Mr. Lee refers are “reinsurance” and “risk corridors.” Under the Affordable Care Act, they were always scheduled to expire at the end of 2016. The law anticipated insurers would have trouble estimating costs for the first three years of Obamacare. So, the politicians who voted for the law allotted an extra $25 billion to reinsure insurers against unanticipated losses from those who are older and sicker. On top of that, they established another subsidy named “risk corridors” that were designed to subsidize health plans whose total medical expenses for all ACA customers overshoot a target amount.
Seeing the exchanges were in trouble, the administration tried to pay insurers more money than Congress had appropriated. Senator Marco Rubio led the fight in December 2015 that ensured the administration obeyed the letter of the law, saving taxpayers almost $2 billion. Their expiration is a red herring, because the challenge of estimating medical costs in the exchanges was supposed to have been solved by 2017, not to have gotten worse.
The real problem is that Covered California’s “market” is designed to fail. As described by the Milliman Medical Index: “The employer market is more stable and people are insured more continuously than in the individual market. The ability to move in and out of the individual market, the fairly limited penalty for lack of coverage compared with premium rates, and long grace periods contribute to adverse selection and less stability in the individual market.”
Obamacare’s critics have anticipated this for six years. Obamacare’s crisis will get worse as these premium hikes continue to drive young and healthy Californians to drop coverage and pay the penalty of $695 or 2.5 percent of income, whichever is greater.
It is time for Obamacare’s supporters, in California and around the country, to admit the individual market can only be fixed by identifying solutions that empower doctors and patients and not the government.
Will you please stop telling people they will pay a penalty of $695 with out fully disclosing what will cause the penalty. In your own example of the 40 year old above making up to $23,760. They would be exempt from the penalty because of the 8.05% affordability test. if the premium after subsides is still $170 a month the 40 year old will have to make more than $25,341 a year before they would owe a penalty. If there is no subsidies then the 40 year old would have to make more than $47,403. you are misleading the masses by not disclosing that the majority of the population is exempt form the penalty.
It is the fraud that Obamacare pushers use to get people to purchase this garbage by telling them about the IRS penalty, that most will not owe.
John loved writing…”“The employer market is more stable and people are insured more continuously than in the individual market..”
So, I assume that the Maximum Out-Of-Pocket on this $400 a month plan for a 40-year-old is $7,150 in 2017. Uncomplicated people always talk about the deductible instead of how much you owe if you have a kidney stone.
In the previous paragraph, I noted “the fairly limited penalty for lack of coverage,” which includes the fact that many are exempt, but that is not clear in the sentence. I agree it also could have been clearer in the next paragraph that the penalty is not hard and fast.
Unfortunately, when I write these articles they are usually about 1,000-1,200 words and have to get cut back to circa 700 words for publication. Sometimes a potentially important detail gets cut, which I regret.
That so many people are exempt the penalty adds to the selection problem.
I can appreciate the problem that the media is controlling content by limitations .
However a simple solution would be a follow up artical explaing the important facts left out. I have never read an artical focusing on how few would actually owe a penalty…I guess maybe that wouldn’t be important enough content worthy of publication
The information is out there. I wrote about it in the first year of Obamacare. Might be time for an update.
John, I bet Blue Cross bribed these government creeps to add the $45 copay because it increases the premium $500 a year.
People who purchase their own insurance and have a choice to add the copay OPTION usually don’t.
John, you have 7 days to discuss the dictator’s ending off Short-Term-Medical in the land of the free. The media and all of the non-taxed think tanks won’t say a word. Propaganda in America is as bad as NAZI Germany in 1939.
It looks to me like the exchanges are devolving into de factor high risk pools. I think we should probably just go all the way and turn them into actual high risk pools.
We could do this in the following way:
(1) Bring back medical underwriting and let insurers sell any product that customers want to buy but assign an actuarial value number to each health insurance product offered.
(2) Let people who can’t pass underwriting go into an exchange and buy a plan with an actuarial rating of 70% for no more than 200% of the preferred underwritten rate with the individual’s share of the premium capped at 10% of modified adjusted gross income with no income ceiling to be eligible for benefits and an income floor of 300% of the FPL. The income threshold would be lower between 138% of the FPL, the ceiling for Medicaid eligibility, and 299%
(3) Bring back reinsurance and risk corridors that will reimburse insurers for all medical claims in excess of 85% of premium revenue.
(4) Raise broad based taxes to the extent necessary to cover the cost. That way, everyone will contribute to the cost of covering those who can’t pass medical underwriting but the healthy folks who can pass it will be able to buy a policy for a comparatively low premium.
The problem, of course, is that this would be expensive and the history of high risk pools at the state level and the ACA high risk pool that was offered during a several year transition period before the exchanges started up isn’t very good. The Kaiser Family Foundation recently published a good article on the history of high risk pools which can be found here.
http://kff.org/health-reform/issue-brief/high-risk-pools-for-uninsurable-individuals/?utm_campaign=KFF-2016-August-High-Risk-Pools&utm_medium=email&_hsenc=p2ANqtz-8cVxfEGdFfNmworJR9neGVfd0HS94_9w0MiOIby5zaKjZ3SIsYGGsiaCyEnb19NLAfrbL-jdVEbGZUqA-S6BMyeYo5aA&_hsmi=32341815&utm_content=32341815&utm_source=hs_email&hsCtaTracking=543e79cf-dc79-4669-9148-44faedddffdf%7Cab67fb54-5c08-41a3-8d8a-88af212ef04b
Well put, Barry!
I wonder how much the tax increase needs to be.
If the individual market has 15 million adult insureds and 20 per cent of them are high risk, then that is 3 million candidates for the high risk pool.
If the real cost of each high risk person is $15,000 a year and the insurer can only charge $5,000, then that is a $10K subsidy.
Total cost of the high risk pool would be $30 billion a year. That would not be a large tax increase.
I wonder what the real high risk numbers would be, though.
Bob – Thanks.
Here’s my take on what it would cost to replace the ACA with a system that worked for everyone including the unhealthy and already sick.
Total current U.S. population: 320 million.
Subtract 150 million lives with employer provided insurance.
That leaves 170 million.
Subtract 70 million currently on Medicaid.
That leaves 100 million.
Subtract 47 million on Medicare (excludes 10 million already counted as on Medicaid)
That leaves 53 million.
Subtract 12 million illegal / undocumented immigrants.
That leaves 41 million. Let’s round it down to 40 million.
Assume 20% or 8 million flunk medical underwriting which is in line with the KFF study findings.
Using your net subsidy figure of $10K each, it would cost $80 billion per year to provide health insurance for this group of 8 million people.
Assume the other 32 million people get age-based tax credits averaging $2K each to level the playing field with those who have employer provided coverage. Those credits will cost $64 billion per year.
Total taxpayer cost: $80 billion + $64 billion = $144 billion per year.
Assuming low single digit medical inflation, the CBO would probably score the program as costing $1.8 trillion over ten years or a bit more.
Like I said, it would be expensive but drastically cheaper than single payer in terms of new taxes required.
The provision of $2.5 billion annually for ten years to help finance high risk pools that’s included in one of the recent republican ACA replacement proposals is a joke in the context of what it would most probably cost to get the job done. Their number reflects the fact that politicians have never been willing to vote to spend the money that it would really cost to cover a comparatively small number of unhealthy and already sick people many of whom may be too sick to even vote.
It’s a conundrum we’ve yet to resolve.
Barry, why subtract 150 million people on employer-based health insurance that already cost way too much. We need to cap the deduction of employer-based health insurance at $20,000 a year per family because people like John Graham get a tax savings of $10,000 a year at that amount and rich people like John don’t need more than $10,000 a year when poor school teachers in TEXAS get NOTHING when they buy Individual Medical with after tax dollars.
John is a Canadian in the top 1% and why should he get such a huge tax dodge when real American families get NOTHING? I don’t know what John earns but John Goodman said he was making $500,000 a year at the non-taxed NCPA. John’s income and payroll tax is 50%. I bet John has dental on his plan too – soaking the taxpayers of America for every dime he can get.
John Graham is not paying income or payroll tax on his over-priced employer-based health insurance plan which is not fair. Remember, in America all men are created equal.
This blog used to be about free markets but now it has ended up being a showcase for Socialists trying to save employer-based health insurance.
Also, that mandatory $45 copay on that silver plan in CA automatically disqualifies all good citizens of a tax-free HSA so they must pay Obamacare’s large Out-Of-Pockets with after tax dollars. Of course employees have those FSA that they lose every dime if not spent by December 31st of the year.
Barry, why subtract 70 million on Medicaid? Age-based tax credits will shrink this number and also shrink the number on employer-based health insurance.
“The Department of Health and Human Services just “found that the ACA’s Medicaid expansion enrollees cost an average of $6,366 in (fiscal) 2015–49 percent higher than the $4,281 amount that the agency projected in last year’s report.” That’s quite a mistake.”
http://www.maciverinstitute.com/2016/08/higher-medicaid-expansion-costs-reveal-another-obamacare-design-flaw/
The TRUMP age-based tax credits will save the American taxpayer tons of money plus these poor people can escape the poor quality of Medicaid’s HMOs that pay NOTHING if a sick person goes out of network. We are talking about saving lives here. It’s a win-win situation for everybody except these corrupt Medicaid companies that are bribing the politicians of both political parties.
Barry, your analysis is very logical.
But doesn’t it astonish you that so much of the public debate is about how to pay for unaffordable costs – yet there’s so little attention to the more fundamental question: how might medical care be delivered at much less cost in the first place? (I know you know I’m not talking about what doctors and hospitals charge – that’s their revenue. I’m talking about what it costs them to deliver care).
One reason for this lack of attention is that our so-called leaders have failed for decades to articulate an effective public policy for health care – not just medical care, but public health too. Yeah, Obama babbled something or other about bending the cost curve. Just words. Meanwhile with each passing year, the consequence of this policy failure just gets bigger.
John – You’re absolutely right, of course. I think there are several aspects to the healthcare delivery issue besides the actual prices per service, test, procedure and drug which are higher in the U.S. than in other developed countries, at least for the most part.
One aspect is that healthcare delivery costs will often be higher when insurance is paying than it is when the individual patient / customer pays. An auto body shop will often pad the bill to fix minor accident damage when the repair is covered by car collision insurance. If the customer is paying out-of-pocket, ways can be found to do the work for less. Maybe reconditioned parts are used instead of new parts. Maybe the paint job isn’t quite as thorough. When my son recently had $1,500 or so of damage from a burst water pipe in his house, a contractor told him point blank that they wouldn’t pad the bill because he knew my son would be paying out of pocket. If homeowner insurance was paying, the industrial fans would have remained in the house for an extra day or two and some other unnecessary work would have been done as well. With health insurance, patients often get as much physical therapy, home healthcare, drug and alcohol rehabilitation, etc. that insurers will pay for whether they need it or not. This all suggests that if patients paid more of the bill out of pocket, healthcare costs would be lower. The issue, of course, is that some patients can afford to pay a lot more than others, so how do we strike the right balance?
Another aspect is all the defensive medicine that takes place, especially in some of our more litigious states and cities where the system heavily favors plaintiffs. It’s as though juries and judges view it as part of their job to redistribute wealth to lower income people regardless of the facts of the case. That’s one reason why we need to get these alleged malpractice cases out of the hands of juries where lay people can be swayed by emotion and into specialized health courts.
A third aspect, which I recently learned from a Philadelphia based cardiologist over at The Healthcare Blog is that the bar used by the medical specialty societies to incorporate new drugs, devices and surgical procedures into practice patterns is now much higher than it used to be mainly because cost considerations are given much more attention. For example, he cited the results of a study called COURAGE that showed that inserting cardiac stents in asymptomatic patients with narrowed arteries was no more effective than medical management (drug therapy). As a result of that study, stent insertion fell by 50% pretty quickly.
Finally, there is the issue of end of life care though it’s not so easy to tell when the end of life will occur in many cases. Too often, adult children emotionally can’t let go and insist on a full court press even when the prognosis is dire and further treatment is probably futile. That is less of an issue in other developed countries where part of the social compact is that you don’t impose unreasonable costs and expectations on your fellow citizens. So it goes.
“This all suggests that if patients paid more of the bill out of pocket, healthcare costs would be lower.”
I concur, but that’s anathema to the pols. They’re locked into a redistribution scheme that rarely it’s mentioned.
Back in the 1960s, before Washington really got its claws into health care (despite Medicare/Aid beginning in 1965), there was a substantial amount of Health Care costs paid for out-of-pocket. ~1/2
That’s changed as you all know, as well as various states (and prior to the advent of ObamaCare’s “essential health benefits” some states were far more tolerable than others) piling on mandates for virtually everything.
Those are two of the major reasons (our system is basically third-party payer) health care costs are so high today.
It’s sad how central-planning is basically engulfing everything in this once great nation.
I should also mention that the rise of health insurance itself was the idea of FDR & some of his minions back in the 1930s
Thanks Barry for chopping into the numbers.
I would suggest two amendments after you get to about 40 million in the individual market:
1. Some portion of this total consists of illegal immigrants.
They won’t sign up or at least I hope they won’t.
2. Some portion of this total includes persons under age 25.
They are much less likely to have chronic illnesses.
All in all, I would estimate the high risk pool at closer to 5 million than 8 million.
The size of that pool will have something to do with what the revived insurance industry does with underwriting standards. Back in the old days, I had clients declined for taking acne medicine or being 30 pounds overweight. Have to wait and see on that one I suppose
Bob, you said, “Back in the old days, I had clients declined for taking acne medicine or being 30 pounds overweight.”
Bob you know it was one particular dangerous acne medication. PLUS, a 5’5″ woman weight can be 220 LBS, yet today, and she is perfect and will not be declined. Are you saying that a woman 5’5″ with a weight of 225 LBS is only 30 pounds over-weight?
There is nothing you, or the other Socialists, can say that can save the over-priced dangerous employer-based health insurance market. It’s days are numbered, sorry.
As you note, Barry, one reason for high health costs in the US is that we often apply a space-program, get-to-the-moon, damn the costs perfectionist approach.
If one person is harmed by cost-cutting, that is enough to crank up the lawyers and the media. Insurance companies routinely lost suits when they declined to pay for experimental care.
There is some genuine humanitarian caring in this approach.
I do not want to make it sound all bad. What I can say is that it is fiscally outdated. It is not 1963 any more when it did feel like America had the money to do anything.
John, I have an appointment on Monday with a 40-year-old TEXAS father with a family of 4 who have their health insurance from his wife’s employer, a Leon County, TX, school teacher paying $1,322 payroll deduction for coverage with a $5,000 Out-Of-Pocket per person with Scott and White.
I emailed him his premium on a PPO for $309 a month with $2,500 deductible and $4,500 maximum Out-Of-Pocket per person. He will save over $1,000 a month!!
John you said to me, “Maybe your business would improve if you focused on markets where people have jobs and job prospects? Of course, if you are addressing these folks’ access problems for charitable purposes, I am sure all the blog readers thank you for it.”
John, you should care about teachers too.
http://docs.mgmbenefits.com/External.aspx?DocID=1588439&InBrowser=1
Ron — How come you never offer any constructive ideas about how to cover the unhealthy and already sick? Do you think high risk pools are a good idea? What do you think they would cost and how would you pay for them?
In the pre-ACA days, 19% of applicants for IM couldn’t pass underwriting according to the KFF. Are they supposed to just suck it up and remain uninsured while you earn nice commissions selling low cost underwritten coverage to healthy people?
Barry, you say, “you earn nice commissions selling low cost underwritten coverage to healthy people?”
If it makes you feel better all of my customers over the last 20 years will have their insurance terminated by December. When Obama said you can keep your health plan – he lied.
Also, all customers with United Healthcare Individual Medical will have their coverage terminated too by December. So, that is the 2 largest Individual Medical insurance companies in the USA.
I have lost everything that I have worked for my whole life and you say I have nice commissions, what a lie.
You want employer-based insurance to terminate sick employees insurance to keep adding to the problem. You said above to leave all those on employer-based insurance and Medicaid alone. I think that we need reform exactly like all Republicans.
I’m sorry I don’t support yours and Hillary’s ideas. That is why I think John should write about Republican ideas but he says he can’t be political with the non-taxed status of the NCPA.
Ron – You always raise the issue of people with employer coverage losing their coverage if they get too sick to work once COBRA runs out if they can afford to pay the COBRA premium. Yet you never mention people who lose IM coverage because they lose their job and their source of cash flow and can no longer afford to pay the premium. You also don’t mention those who lose their IM coverage because their insurer goes out of business or withdraws from the market in their particular state or county. If such a person got sick in the meantime, he presumably couldn’t pass underwriting when seeking coverage with a new carrier.
Under my approach, the person with employer coverage who got too sick to work would qualify for coverage through a subsidized high risk pool that capped his contribution toward the premium at a reasonable percentage of income. For your healthy folks, I offered to support age-based tax credits. For the teacher you referred to who would be charged a very high premium to add her spouse, that would be deemed an unaffordable option under my approach and that family member could also qualify for age-based tax credits if healthy and a subsidized high risk pool policy he can’t pass underwriting.
If everyone with employer coverage were offered age-based tax credits, most of the 80% of who could pass underwriting would leave and buy IM coverage instead but the employer would still be stuck with 80% of the costs to cover the 20% who remained because they couldn’t pass underwriting. That would be untenable and the employer would cease offering coverage altogether and just raise salaries by the amount it was previously paying for health insurance. How that would sort out for employers with collective bargaining agreements I have no idea.
The best case under your approach is that all the healthy folks would be able to buy cheap underwritten coverage with financial help from age-based tax credits worth perhaps $2K each on average. However, the 20% who can’t pass underwriting would account for as much as 80% of healthcare costs and would have to be covered through high risk pools paid for mainly by taxpayers. The tax increase necessary to pay for that would be substantial and it’s less than clear just how many of your healthy customers would wind up net better off financially at the end of the day.
Remember that if we got rid of both employer coverage and Medicaid, at least 50 million people would flunk underwriting and would need to be covered through high risk pools at a cost of probably $15-$20K each. Subtract the $150 billion of so we’re currently spending for the portion of Medicaid that excludes the aged, blind and disabled which is 70% of that program’s expenses and you still have an incremental cost of $600-$850 billion to subsidize the high risk pools while the cost of the age-based tax credits would cost an additional $400 billion less a recapture of $250 billion from no longer having the employer tax preference. When you look at the total picture, the numbers are much more daunting than you make them out to be.
Barry, I asked you why you make NO adjustments to employer-based health insurance and Medicaid.
1st. Should rich people like John Graham have an unlimited tax dodge for employer-based insurance or should we cap it at $20,000 a year per family? (Remember – poor school teachers that can’t afford over-priced employer insurance get NOTHING when they buy insurance with after tax dollars. It’s not fair.)
2nd. Would a cap of $20,000 per year for employer-based insurance (people like John would pay $5,000 a year extra in taxes on $30,000 a year coverage) make a bunch of healthy workers go to low-cost Individual Medical with tax credits?
3rd. If healthy employees switch to low-cost Individual Medical then your 150 million lives on employer-based insurance would be smaller right?
4th. Can you now see why your goofy numbers are a from a Slow Socialist Schnitzel (3-S)? (Remember that you said in the last 40 years that you have never heard of anybody losing their employer-based health insurance because of the eligibility clause)
Ron — John McCain proposed converting the employer tax preference to a fixed dollar tax credit when he ran for president in 2008. The idea didn’t gain traction then and he lost the election. Given the power of labor unions, it’s not likely to gain traction now either.
You still refuse to say what you would propose to do about the unhealthy and already sick who can’t pass underwriting. I can only assume that you either have no ideas to address that issue or you don’t care.
For the record, I would be fine with capping the employer preference at $20K. In fact, if it were up to me, I would eliminate it altogether. The ACA proposed to cap it at $27,500 starting in 2018 and it’s already been pushed out two years to 2020 because the unions oppose it. It will probably never go into effect.
Barry, I know much more than you about medical underwriting, exclusionary riders, medical rate-ups and declined consumers so I would be an excellent person to have ideas on how those with health issues can get health insurance.
I asked you a question on why you don’t think we can touch the employer-based market with future medical reform. If we take your ideas then all employees who get too sick to work automatically lose their health insurance and their insurance companies laugh all the way to the bank.
Your plan doesn’t hold insurance companies, that sell dangerous employer-based health insurance, feet to the fire. YOU should say that no insurance company should be able to terminate a sick persons insurance. But you refuse to say this, WHY?
Don’t say your usual that Unions run this country.
“I know much more than you about medical underwriting, exclusionary riders, medical rate-ups and declined consumers so I would be an excellent person to have ideas on how those with health issues can get health insurance.”
I’m interested in hearing your plan. Senator, it’s your turn . . .
https://youtu.be/angi1vwUkQc
I’m reminded of that Wendy’s ad from the 1980’s with the tag line “Where’s the beef.”
Maybe there isn’t any.
Instead we just keep hearing about the same Texas school teacher who would have to pay $1,100 per month to add her husband to her employer’s Blue Cross plan and that if you get too sick to continue working, your employer coverage is TERMINATED.
I talked to this teacher’s husband on Thursday for the 1st time and emailed him.
I have never talked about Leon County school district before.
It was not Blue Cross but Scott and White, geez.
At least you are getting into the swing of typing in ALL CAPS when you want to emphasize something, like Mr. Greiner, who I am sure is a MILLIONAIRE MANY TIMES OVER!!!
It makes for a nice long thread of comments.
John, why would I be rich when Obamacare has TERMINATED all of my clients?
Obamacare has run a million health insurance agents out of business. I thought you understood that John.
Well, that explains why you have so much time for commenting on the blog. (I get paid to do this, but it does not make me a MILLIONAIRE!!!)
Ron, the $309 per month plan for the family of four will also terminate in 6 or 12 months. (or less if the gov’t hammers down harder on short term insurance.)
This plan will not cover any pre-existing conditions, which may or may not trip up someone in this family. I have seen short term health insurers get very aggressive on denying claims.
In a way the health insurance question is like the debates about life insurance. You can get your life insurance premium down to pennies a day if you buy the shortest term plan out there. We used to see non-renewable one year term for next to free.
But the person who bought one year term was taking the risk that the next time they went through underwriting they would be turned down.
The general feeling in the USA is that adults should be able to take that risk in life insurance.
But with health insurance, the general feeling is that we should discourage that kind of gambling.
I can listen to arguments either way, actually
On another note: I do sympathize with the fact that you have lost all renewals on individual health insurance.
My agency would probably be bankrupt except that our business is about 70 per cent Medicare, which has excellent renewal streams. The federal government, knowingly or not, actually takes good care of agents in the Medicare supplement arena.
Bob, this is a bad argument, sorry. As you say, if a 10-year-term life insurance consumer, lost their life insurance 18 months after they got cancer, in the 3rd policy year, then this insurance would be less expensive.
Bob, employees who get employer-based insurance are GAMBLING that they won’t get sick and slammed on very high COBRA rates right when they need the coverage the most. Then COBRA ends in just a few month.
Did you tell employees to purchase this employer insurance then if you get sick you will end up on expensive high risk pools paying huge premiums, if you can get insurance at all depending on which state you live?
What you mean to say is that an HMO will pay NOTHING if a consumer goes out of network. YOU know the STM product is a PPO so you are just being loose with the truth again.
Bob, you have all ready agreed that 100% of your employer-based health insurance customers lost their insurance if they became too sick to work. That is not a gamble but a guarantee.
Barry, your plan doesn’t end the never-ending spiral of healthcare costs. Instead it acts as a bandaid temporarily covering up the problem until a later date when someone else has to take charge and do what is necessary under circumstances that have deteriorated. Your ACA band-aid didn’t work and neither will your most recent band-aid because neither of the programs you support deal with lowering the cost of healthcare.
Employer-sponsored health care is at the root of many of our problems. It even causes problems for those looking for IM coverage for the insurers assume anyone looking for IM has a higher likelihood to be sick and require more resources. Ending employer-sponsored healthcare puts everyone in the same boat so that this appearance of illness disappears and less people will be denied coverage. Every insured person is a potential profit center for the insurer so the insurer really doesn’t want to give up on 50 million people. They only do so because of policies you promote.
You worry about the high-risk patient who can’t buy medical insurance, but it has been your policies that made so many of them uninsurable. Then you throw numbers around as if there is no meaning behind those numbers so one has to severely doubt any conclusions you have drawn.
Alan, I believe that ACA premiums are going up because the ACA risk pool is getting older and sicker.
This is an actuarial death spiral.
I used to administer a health plan for retired school teachers. When we were hit with huge premium increases, I would barrel in and demand details from medical providers, assuming that they were gouging us.
They were not. We just had more cancer claims, and of course we had no healthy young members coming in.
The ACA is entering a death spiral. This raises premiums regardless of whether the national cost curve is changing.
Insurance runs on its own logic in a lot of cases!
Death spirals, yes, that is one reason why Barry’s band-aid approach doesn’t work. There are many others.
Before the ACA, the individual underwritten market never insured more than 18-20 million people at any given time out of a total population of more than 250 million net of Medicare enrollees. Why do you think that is when you didn’t have the ACA to blame?
I am not sure of your numbers nor the significance of them. But, Employer sponsored health care is responsible for a good part of the blame and that preceded the ACA. In part, it created the high-risk person in the IM market. Your type of policies have created the problems we face today and now you want to pass more of the same.
Barry, you know that teachers who get employer-based health insurance get a big tax dodge and when they buy insurance in the individual market they do it with after tax dollars. You know it is not fair and that is one of the reasons for fewer people on individual insurance when they opt for dangerous employer-based insurance.
Ron, the person on employer based insurance is taking a tiny tiny gamble if they have a protected job in a large generous company or government agency. Their chance of losing insurance before age 65 is absolutely microscopic.
The person in a less secure job is taking a gamble that they can continue working. I worked in less secure jobs for 35 years and got coverage in every single one of them. I had to take COBRA one time for 3 months.
In an individual market with full underwriting, the insured is gambling that the carrier will not raise their rates.
That can be a big gamble. In the arena of long term care insurance, almost every insurer has lost that gamble.
Employer insurance is not perfect, and you are correct to point that out.
But employer insurance has been secure for millions of Americans and its percentages are very good.
You’re absolutely right Bob. I would also point out that employer coverage has covered millions of sick family members including premature babies who sometimes rack up seven figure bills. The much bigger risk with employer coverage than getting too sick to work is losing your job because you were laid off or fired. The insurance fix for that is to allow the affected people to pick up COBRA for an indefinite period until they can find another job that offers health insurance. Of course, most people can’t afford the COBRA premium which is why only about 2% of those eligible for it take it. However, if they have IM coverage and lose their job and source of cash flow, they won’t be able to afford that premium either if they have little or nothing in savings which is the case for a surprisingly high percentage of families.
Allan — If there were no employer coverage, I still suspect that there will be a huge number of people who are declined when they apply for coverage and I don’t see what role insurers who sell IM coverage will have in lowering the cost of healthcare. HMO’s are cheaper than PPO’s but you have always been critical of them for saving money by denying necessary care and then getting sued.
If employer coverage went away, hopefully everyone would buy their health insurance with after tax dollars like they do for every other type of insurance they purchase. It will be up to the political process to figure out how best to provide subsidies for people who can’t afford the full premium on their own. I don’t think employer coverage is going anywhere though mainly because the unions like it and will fight to the death to preserve it.
Ron – If you know so much about the underwriting process and are best positioned to have good ideas about how to provide insurance for the unhealthy and already sick, what the heck are they? What’s stopping you from telling us?
Barry, that numbers game too frequently played is meaningless. Many of the people that you want high-risk pools for were formerly employed with employers insurance. Thus, on the one hand you wish to alter in a negative fashion the insurance for a couple of hundred million people while you have a dismal concern for one of the major reasons a person requires a high-risk pool.
Bob, only 29% of employers with less than 50 employees offer insurance in Florida. Are you saying that everybody must work for a large employer?
Also, you know when a business goes out of business that there is no COBRA. Are you saying that no companies go belly up?
Most hiring in America is in small business, start thinking.
You don’t make much sense to me.
“Ron, the person on employer-based insurance is taking a tiny tiny gamble if they have a protected job in a large generous company or government agency.”
Bob, your ‘if’ is a very big ‘IF’. IF only I was a foot taller I could be a basketball champion. Jobs are not protected and companies aren’t all generous. Quite the contrary to your statement the loss of employer-provided insurance is a real threat. You talk about the millions that never lose it, but the only group of interest is the group that is sick and needs the insurance. That means that tiny gamble becomes a giant gamble. Not only that, but it creates job lock so if one becomes ill and gets demoted with a much lower salary they can’t easily quit their job.
The problem with fixing health care deliver is how to pay for the sick…our current system and all of the proposed systems will not solve these problems.
I define insurance as spreading risk over a large group of people that can not be personally financed.
So what is the average cost of healthcare throughout a persons life?
The majority of people have very few healthcare expenses that can not be personally financed . I’m currently in my 50’s and have been hospitalized on 5 seperate occasions . In the last 25 years I have had one medical claim. It was for Kidney stones . Total cost of MRI and treatment about $4000 . All of the expenses I have had over the last 50 years are personally financeable. 10’s of thousands cheaper than any insurance premiums.
One day I will have massive medical claims. I look at the last few months of my father in laws life where he ran up over $100,000 in claims to prolong his life a few months.
If we look at my experience as an example of the majority then how do we finace the average healthcare costs throughout ones lifetime?
I would say we would have to start with the phasing out of all health insurance both employer based and individual.
Create lifetime medical care accounts that are seeded with federal funds upon birth.
Also funded with a small payroll tax throughout life. Are controlled by the individual as far as dispersement to providers. Allow accounts to be passed on to dependents.
Barry, John , John , Devon , Bob, Ron and anyone else . Please take some time and think about how a system like the one I described could work for everyone?
Obviously young sick people that have not had enough time to build up there accounts would have to have additional subsidies .
Would my father in law have spent $100,000 of his account the last month of his life to prolong his life 1 month if he could have left that money to his spouse? Perhaps but it would have been his choice .
“I look at the last few months of my father in laws life where he ran up over $100,000 in claims to prolong his life a few months. ”
Lee, to add an additional consideration, was the claim $100,000 or was that what was actually paid. We see high numbers on our bills, but the actual amount paid is frequently a lot lower. That makes us grateful to have insurance, but I have seen hospitals charge 20X what they actually get. That could make that $100,000 bill only cost $5,000 at which time many might feel their premiums are way too high.
$100,000 was what was paid out. Between the first emergency room visit then the next week in intensive care. Then another week inpatient . Then 3 weeks in skilled nursing. They kicked him out because he could not affored to pay when his insurance ran out. Back home for two weeks. Then back to the emergency room . Intensive care for another 10 days. Then pull plug and death.
Saldly he cashed in a life insurance policy to pay for one week of skilled nursing that wasn’t covered. All this happened while he was waiting on Medicaid approval.
We have a broken system top to bottom and the only fix it is to start from scratch with a better way to finace ones healthcare for there life.
Let’s look at simply putting $100,000 in a Healthcare Account at Birth and how an average person would see this grow over an average life time. Take into account a Guarantee rate of return of say 2% and instead of a Medicare payroll tax keep the same tax for the Healthcare account.
Medicare, Medicaid and Insurance are phased out over the next 75 Years.
Tom Price has Age based tax Credits. Over 75 years this would cost tax payers $143,100
$900 per child to age 18 $900 x 18 =$16,200
$1,200 age 18 to 35 $1,200 x 17 = $20,400
$2,100 age 35 to 50 $2,100 x 15 = $31,500
$3,000 for age 50+ $3,000 x 25 = $75,000
0 to 75 Average Expenses Estimate $196,000
Age 0 to 1 $3,400 $3400 x 1= $3400
Age 1 to 5 $2,500 $2,500 x4 = $10,000
Age 6 to 40 $1,400 $1,400 x 40 = $47,600
Age 40 to 50 $2,500 $2500 x 10 = $25,000
Age 50 to 60 $3500 $35,00 x 10 = $35,000
Age 60 to 75 $5000 $5,000 x 15 = $75,000
$100,000 placed into a Healthcare Account at birth with a 2% yearly growth. With the above per year deductions and the Current Medicare tax starting at age 25 to age 70 and assuming the average person will pay about $65,000 in Medicare tax over the 50 year period.
Year 1 $100,000 – $3400 + 2% = $98,532
Year 5 $96,000
Year 10 $100,000
Year 25 $112,000
Year 40 $180,000
Year 50 $200,000
Year 60 $205,000
Year 75 $205,000
Funds may only be used for healthcare during one’s life time. Upon Death funds if any are split between Healthcare Industry, federal government and dependents on a 25%/25%/50% bases.
This will give incentives for the medical community to not over charge and put some cash back into the federal government and also give incentives to individuals to be more cost sensitive to expenses.
This eliminates all Health Insurance, Medicare, Medicaid and helps solve the problem with funding long term care for the next generation.
Radical changes like this are the only way we can fix the problem. Although taking 75 years to implement probably is not feasible with the state of our fiat currency. We will probably see a worldwide financial rest in the next 10 years anyway.